House Ways and Means Oversight Subcommittee Chairman Charles W. Boustany Jr., M.D., (R-LA) today announced that the Subcommittee will hold a hearing with Internal Revenue Service (IRS) Commissioner John Koskinen. The hearing will take place at 9:30 a.m. on Wednesday, February 5, 2014, in room 1100 of the Longworth House Office Building.

The Commissioner of the Internal Revenue Service, the Honorable John Koskinen, will be the only witness at the hearing. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.

BACKGROUND:

John Koskinen was sworn in as the 48th Commissioner of the IRS on December 23, 2013. This will be Commissioner Koskinens first appearance before Congress as Commissioner, allowing for discussion on a wide variety of issues before the IRS that affect American taxpayers. The hearing will focus on the ongoing investigation of IRS targeting, the newly proposed regulations concerning 501(c)(4) groups, the backlog of applications for tax-exempt status, IRS responsibilities under the Affordable Care Act (ACA), and improper payments of tax credits.

The IRS became the subject of intense public scrutiny in May 2013 when it was revealed that agency officials used inappropriate criteria in selecting 501(c)(4) tax-exempt applications based on name and policy position. Despite the fact that Congressional investigations into the targeting have not concluded, on November 29, 2013, the Obama Administration issued new proposed regulations on 501(c)(4) organizations, the first rule change in more than 50 years. In addition to these concerns, the IRS continues to struggle with an enormous backlog in applications for tax-exempt status. There are now almost 8,000 501(c)(3) applications pending at the IRS that are more than a year old.

The hearing will also examine the IRSs role in the income and data certification functions related to the ACA. These new responsibilities come at a time when the agency is also under scrutiny for its failure to address the growth of improper payments. Over the last ten years, the IRS erroneously made an estimated $140 billion in improper payments arising from refundable tax credits. Earned Income Tax Credit (EITC), the largest refundable tax credit, consistently ranks among the top sources for erroneous payments out of all government programs. Last year, 21 to 25 percent of EITC payments were erroneous, costing American taxpayers as much as $13.6 billion.

In announcing the hearing, Chairman Boustany said, The IRS carries out the critical function of collecting federal revenuethis is why it is alarming that its priorities have gone so far astray. Improper payments and identity theft continue to be major challenges for the agency and yet the IRS devotes more than 800 employees and millions of dollars to ObamaCare implementation. It has acknowledged targeting groups based on their personal beliefs, but now is using that scandal to justify new proposed regulations that will silence the very groups that were abused. The problems at the agency are many, and they are diverse, but what they all have in common is it will be up to Commissioner Koskinen to begin correcting them.

FOCUS OF THE HEARING:

The hearing will focus on a variety of issues facing the IRS, including the ongoing investigation into the IRSs targeting of certain tax exempt organizations, proposed regulations regarding 501(c)(4) groups, IRS responsibilities under the ACA, the 501(c)(3) backlog, and improper payments.

Black - uncovered IRS surveillance to monitor tax exempt status
Groups referred to surveillance were returned for further review
what is the status of surveillance program?
Answer: surveillance is not in existence - IRS will monitor/ reviewed as needed

Jenkins - R - Kansas
asks about subsidies for ACA & possible tax fraud
From Inspector general report:
Lack of fraud mitigation relating to tax credits - no strategy
IRS fraud may not be capable of discovery of fraud.

What is the IRS doing?

Response:
IRS - rollout on our part went very well, despite other issues with rollout.
Estimates of tax credit - reconciliation at the back end
In terms of fraud potential - advance tax premium goes to insurance company & therefore little incentive for fraud

We will get from insurers who is getting subsidies.
We do need to make sure that people are reporting their income correctly and we are developing “screens” for that.

Tom Reed - R - NY
IRS has lost trust.
Obama made statement in interview about “no corruption”.
Yet you stated there are 6 investigations, is that a responsible statement by the President about the status of IRS.
Response: statements in face of open investigation, which draw conclusions when it is still ongoing.

Reed: what I just heard was you don’t want to answer the question.

Answer: it is not my role to respond in a debate about perceptions.

Reed: there is no way to come to a conclusion at this time.

Response: evidence is unfolding.
I won’t second guess comments by anyone.

Reed: restates comment - no conclusion?
Response: yes

Reed: How do you know there is under-staffing issue and how will you measure the fulfillment of actions taken?

Response: how many phone calls go unanswered. that is a measure of lack of staff.

Reed: how do you know that people are not doing their job?

Response: I have been to call centers - and calls not getting answered has nothing to do with “not doing their job”.

Paulsen - R - MN
Proposed rules for tax exempt status - released in the middle of ongoing investigation
under new rules - would still be able to conduct non-partisan
Correct?
Response: Yes
Further questions on the status and how they differ

Is the intent to drive 501c4 out of status?

Response: Final regulation won’t help unless it solves the issues and will consider comments

Paulsen: groups targeted - what procedures does IRS have in place to know they are not being targeted?

Response: IRS has detailed procedures and assure you those audits are identified by specific details.
IRS will be doing audits in a fair way - it is done independently

Paulsen: would you be willing to work with my office on groups targeted?

response: series of issues - we need to investigate - delighted to work with your office.

Kelly - restore public trust - people come and say use my story but don’t use my name.
how will you turn this around? This is a trust issue.
Make a million 1 in ten chance to be audited?
Response: yes

Kelly: employees of IRS - income amounts

Response: looked into that employee income
employees under critical pay

Kelly: because of your background - called to turn around companies
you are drawing a conclusion - based on facts not being revealed
the truth is we don’t know do we?
Response: No
Kelly: No one can say there is no evidence, because it is not done - those types of answers add to the gap - public trust issue

Kelly: when I am home, they ask how do we know we can trust the government
we give them reasons not to trust us - hearings like this are important
You can’t use my name is chilling
when people say nothing to see here - that’s a clue there is a cover up

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